Energy Deregulation Explained

If you live in one of the dozen or so states that has voted to deregulate the supply of electricity to its citizens, you probably pay more for your power than necessary. Energy deregulation means that you can choose who supplies electricity to you so power producers have to bid to earn your business. In states like mine (IL), the local utility was required by law to send out letters to all its customers informing them that they had the option to purchase power from alternate Retail Electric Suppliers (RES). What the utilities did not say in the letter was that choosing to select an alternate RES would probably save them 20-30% on their power bill.

Electricity generation is a huge and rather complicated business so you might not be aware that your local electric utility (who you pay each month) may not be the same company who actually generates the energy you are paying for. We don't have the choice in local utility companies but we do have the option to choose from different producers. In my case, ComEd is the local utility that delivers power but other companies supply electricity to me through ComEd. Opting for an alternate RES won't change anything about the quality of your electric power or the service receive--you just pay less for it.

States like TX, IL, OH, PA, NY, CT, MA, RI, NJ, DE, MD, and Washington D.C. are deregulated electricity markets 

I recently enrolled with an alternate RES through a local company. My wife and I live in a small condo so we use relatively little electricity (only 3,869 kWh last year). Most homes use significantly more energy than this, but I still save over $100 a year after signing up. Many businesses like restaurants or convenience stores use 250,000 kWh or more in a year so these companies see thousands of dollars in savings each year going with an alternate RES. I still receive a single bill from ComEd but the portion under Electricity Supply Services is now a single line item with my new kilowatt-hour (kWh) rate listed along with how much we used last month. I was told this is the same for corporate account holders too.

I encourage you to read up on energy deregulation and decide if choosing an alternate RES makes sense for you. Let me know if you have any questions about my experience.

Water heating is bigger than ever

A lot has changed in energy since the 70's, but we still use a lot of it.

We do have a bit of good news on the residential energy efficiency front.  The average American home uses just about the same amount of total energy as it did 30 years ago despite a rising standard of living and more plug-in creature comforts than ever before.  It's actually trending down on a per household basis.

I see two problems with this however.  First of all, we have a whole lot more homes today than in 1978.  We're around 115 million households today where we were only at 68 million in the 1970s.  While flat or even slightly declining per household energy consumption is great, 47 million new households means that we're using a lot more energy on the whole than ever before.

Where we use energy in our homes--1978 and today.

The second problem I see with this data is highlighted in the two pie charts above.  Where we use energy has shifted rather dramatically.  Due to key improvements in building technology and code, space heating accounts for much less of our homes' energy budget.  Air sealing, insulation, and mechanical system efficiency enhancements have worked.  This was low hanging fruit though and further total efficiency gains are going to be harder to achieve.

Take a look at the water heating portion of the chart.  20% of our residential energy goes to heating up water for showers, cooking, and cleaning.  This is a very predictable energy load that is completely unrelated to any other mechanical system in the house or to the quality of the building envelope.  As we look to make further cuts in per capita and total energy consumption, the water heating load is an excellent place to focus.

Germany has far less sun & far more solar than the US.  No one thinks the Germans are flaky environmental nuts either.

This is where solar water heating can make a big impact.  We have more than enough sun anywhere in the US to offset the water heating energy requirement with existing solar collector technologies commercially available today. Despite the cyclical ups and downs on the prices of specific types of energy, energy efficiency strategies enacted today will pay for themselves over the long run.

The answer to our energy problems rises every morning.

Solar panels are more than energy generation

Solar electric vehicle charging station at the OMSI in Portland, OR--shelter & power!

Electricity and thermal storage from the sun is pretty awesome, but solar panels can really offer so much more.  In certain parts of the world, covered outside areas are the norm to shelter people, animals, cars, or other equipment from the sun or rain.  Why not incorporate solar panels into the design to replace other building materials?  The structure is already budgeted and the incremental cost adder for the solar panels over the dumb panels would easily pay for itself from the locally generated clean energy.  As the weather continues to warm across the country and here in the Midwest, shading structures will continue to grow as a building design concept.  What a great way to add solar too! 

Chicago Botanical Garden Rice Center green roof with PV panels

Another example of the energy from solar panels being only one facet of its benefit to a building owner is with LEED projects.  Solar panels on a roof reduce the amount of roof space the project manager would need to dedicate to a green roof in order to achieve green roof credits.  Green roofs reduce water runoff, filter this runoff water, reduce building energy consumption, and the local heat island effect which effects the entire community.  Solar panels mixed with greenery are a win-win on all these accounts plus you get local energy production (EA credit 2) to boot.

Reducing expensive roofing materials with solar panels can pay for itself even before any energy generation 

One more example of solar being more than the sum of its energy production value is with slate and cedar roofs or other expensive roofing materials.  With these roof types, the installed cost per area of a roof integrated solar water heating collector could actually be less than the cost of the roofing material that is displaced--even before any energy savings are accrued.  I know that this is true for skylights with the daylighting and natural ventilation benefit being only a fraction of the total energy savings a building project with higher end roofing can see.

The more you look at solar, the more benefits you see, and the harder it becomes to justify sticking with old, polluting technologies.

Changing Times

Renewable Energy World had an article this morning that caught my attention.  The gist was that we have all the proof we need of man made global climate change and all technical tools we need to fix it.  Implementing these fixes won't reduce our standard of living; to the contrary, our collective way of life would be better in a clean energy economy.  For a number of reasons, however, solar hasn't gained the traction that it needs to be a robust industry and we are far from gaining the critical mass necessary for clean energy to dominate the total energy landscape.

Why?  I think the following reasons are part of the total answer:

• Fear of change in the popular mind
• Corrupt politicians on the take from lobbists
• Procrastination
• Nefariousness cabal of fossil fuel executives working for their own benefit to the detriment of society
• Ignorance of the complete cost-benefit profile of clean energy vs traditional energy
• Lack of inspirational leadership to point us down the right path
• Catch-22--we don't know how it will work because no one has implemented it and I want to wait for proof

We're at a societal crossroads now.  Economic issues are forcing our hand even before environmental ones have.  Either way, moving to clean energy is the right path as generation costs from dirty sources continue to swing widely and increment upwards.  Brace yourself for a rocky ride and don't fight the trends.  Flexibility is the key but so is recognizing that today's world will look vastly different than tomorrow's.

---

Come gather 'round people
Wherever you roam
And admit that the waters
Around you have grown
And accept it that soon
You'll be drenched to the bone
If your time to youIs worth savin'
Then you better start swimmin'
Or you'll sink like a stone
For the times they are a-changin'.

Come writers and critics
Who prophesize with your pen
And keep your eyes wide
The chance won't come again
And don't speak too soon
For the wheel's still in spin
And there's no tellin' who
That it's namin'
For the loser now
Will be later to win
For the times they are a-changin'.

Come senators, congressmen
Please heed the call
Don't stand in the doorway
Don't block up the hall
For he that gets hurt
Will be he who has stalled
There's a battle outside
And it is ragin'
It'll soon shake your windows
And rattle your walls
For the times they are a-changin'.

Come mothers and fathers
Throughout the land
And don't criticize
What you can't understand
Your sons and your daughters
Are beyond your command
Your old road is
Rapidly agin'
Please get out of the new one
If you can't lend your hand
For the times they are a-changin'.

The line it is drawn
The curse it is cast
The slow one now
Will later be fast
As the present now
Will later be past
The order is
Rapidly fadin'
And the first one now
Will later be last
For the times they are a-changin'.

- Bob Dylan The Times They Are A-Changin'

Change Happens Faster Than You Think

Maybe not the father of solar energy but a tremendously influential and critical thinker .

“There are decades where nothing happens; and there are weeks where decades happen.”

- Vladimir Ilyich Lenin

I came across this quote today while watching a TED talk about the speed of change we are now seeing in human biology from both intentional and unintentional sources.  A case can be made that we may be an entirely different species of animal than we are today in only a few generations.  It's a fascinating lecture about evolutionary biology, and it sparked a connection in my brain to the state of solar today.

Solar energy development appears to be following this dictum.  Massive changes are happening in the business almost on a daily basis.  The speed of change is so fast that it makes it difficult to comprehend it or make accurate predictions or plans for the future.  In all probability, we will have an entirely new energy infrastructure in less than a couple of decades.  How this might happen or what shape this new energy system will take is still far from certain.

In the face of uncertainty, don't lose hope--focus on the basics. Work to continually improve your general health and intellect.  Study your industry and market.  Engage with customers and suppliers.  Think about the major issues you face on a daily basis and try new things.  Solar energy will win because it's the energy source that got us to where we are today. It's now the time for us to become more a little more sophisticated about how we harness it and much more intentional about how we apply it.

The Silver Tint of the Clouds of Doubt

There are dark clouds on the solar horizon.  Here are a few reasons why:

• All time low natural gas prices are driving down the cost of electricity and heating.
• Little public concern for climate change and zero political appetite for carbon mitigation legislation.
• Movement by utilities across the country to discourage solar PV interconnection.
• Economic depression with faint hope for the new construction market which is essential to a robust economy.
• Confusion in the public about the health of the solar industry due to high profile business failures like Solyndra.

This too shall pass as the famous proverb says because all material conditions, both positive and negative, are temporary.  All is not lost for solar.  We have a global energy market now and other parts of the world are adopting solar at such a clip that the US is going to benefit in the next phase of solar growth.

• The all time low natural gas prices hurt natgas producers and they are predicting rising prices due to production modifications and new markets for natgas like transportation.
• Solar provides a hedge against wild swings in energy prices--for many decades not just a few years.  Solar as a risk avoidance play is already viable around the world.
• Solar accounts for 4% of the electricity capacity in Germany but provides up to 50% of the load at key times during the year and day.  Germany has an inferior solar resource to anywhere in the continental United States.
• The cost of subsidized solar is rapidly approaching the cost of utility provided power.  Coupled with accelerating improvements in grid storage, utility barriers are becoming irrelevant.
• Solar of all types is very easy to install and requires very little training for professional contractors.  It will not take long to scale up solar once the market forces align.
• With nuclear energy on the decline, solar with grid storage is the only viable solution to provide stable power today and into the future.

When things go wrong, as they sometimes will,
When the funds are low and the debts are high,
And you want to smile, but you have to sigh,
When care is pressing you down a bit,
Rest, if you must, but don't you quit.
Life is queer with its twists and turns,
As every one of us sometimes learns,
And many a failure turns about,

When he might have won had he stuck it out;
Don't give up though the pace seems slow--
You may succeed with another blow.
Often the goal is nearer than,
It seems to a faint and faltering man, 

Often the struggler has given up, 

When he might have captured the victor's cup, 

And he learned too late when the night slipped down, 

How close he was to the golden crown.
Success is failure turned inside out--
The silver tint of the clouds of doubt, 

And you never can tell how close you are, 

It may be near when it seems so far, 

So stick to the fight when you're hardest hit-- 

It's when things seem worst that you must not quit.

- Author unknown

Solar doesn't care what utilities want

For any of you who haven't heard of Ray Kurzweil, I highly recommend reading up on his Singularity theory.  He's a fascinating guy and his ideas are even more so.  Pertinent to my interest in solar technology, one component of Kurzweil's Singularity ideas is that technology advances at an exponential rate which is profoundly disruptive to existing technology.  Just as with financial investments, past performance does not predict future returns.  People in the heart of the change often have trouble seeing that straight line forecasts often fail to capture the future impact of a particular technology. Such is the case in the solar business today.

Worth a read

Solar PV is a transformative technology that is already disrupting traditional utility delivered energy models. A recent McKinsey study sums up the current state of PV rather succinctly and charts a few forecasts into the next couple of decades.  In some market segments, PV already competes effectively on price per kWh delivered; in others, the expectation is that other generation technology will continue to dominate but not for much longer.

No one is "letting" distributed solar happen.  In fact, it's becoming adopted despite countless institutionalized roadblocks.  This interaction between Travis Bradford and Barry Cinnamon highlights a critical misunderstanding that many people have about how distributed solar will develop.  We aren't waiting for utilities to let people install systems (via interconnection & net metering policies), and we actually don't need more incentives from the federal government (maybe these have only inflated installation prices anyways).  While both these components have facilitated system installation in the short term, the greater driving trend is the narrowing gap between the retail rate for electricity and the installed cost of solar.

Net metering is serving a great purpose today in helping to grow solar but the electric utilities would like to see it go away because they lose money from it.  At a much larger solar penetration rate than we have today, they would have to raise rates to cover the lost production and distribution charge revenue.  At a TVA sponsored solar event last month, I heard multiple utility representatives talk about how this hypothetical problem should cause us to temper if not even retard current PV installations. Regardless of what happens to net metering, distributed solar is going to continue grow and because of the easily scalable nature of it, I'd bet it will be at an exponential rate as Ray Kurzweil's hypothesis would predict.  Here are three reasons why I think so:

---

Solar is Easy to Install

and it's getting even easier to do so.  The only downside of solar right now is first cost.  Not only are installation prices falling and retail utility rates rising, there are many new financing options to minimize solar's first costs. There is really no reason that a person can't decide to go solar one day and have the system commissioned the next.  Any red tape would only come from utility interconnection and this is irrelevant in solar water heating or in the case of my next example.  When all the economic forces align, we will see neighborhoods transformed from zero roofs with solar to most of them in very short order.

---

Real Time Consumption of Solar Production

No need for utility permission to buy less electricity by producing it locally

All commercial customers and many residential ones are on a Time of Use (TOU) or real-time pricing plan with their electric utility. This means they pay a variable rate for electricity over the course of a day depending on the wholesale rate (cheaper at night, more expensive during the day).  Since solar PV production correlates well to peak rate periods, you can size a cost effective system today to lop off real time demand from grid power without selling any excess energy back to the utility.  If the customer pays $0.25 or more during the middle of the day for electricity, a PV system sized to meet this midday load is cost effective today.  This behind the meter PV system would be invisible to the utility while saving the building owner money.  There is a huge amount of potential new solar work just for this application.

---

Back Up Energy Systems

Many businesses and homes want or need back up generators to guarantee access to electricity during interruptions of grid service and they are willing to pay a premium above the retail rate for electricity to do so.  Brown outs, ice storms, lightening, squirrels, etc. knock out power on a rather regular basis in some areas.  For someone considering a generator, they'll need to figure in the cost of the fuel to power it, the transfer switch wiring in addition to generator itself.  The generator will also have to cycle regularly to keep in optimal performance shape and fuel costs could be significant depending on whether the building has access to natural gas or not.

Inverters offer energy arbitrage options in addition to battery backup functions

An alternative today is a grid tied PV system with battery backup.  This allows for the triple benefit of back up power, peak load rate shaving, and energy arbitrage (charging batteries with off peak rate electricity and using during peak times).  All this adds up to more benefit than a generator backup.  Battery technology has been improving in cost and performance just as PV technology has.  This is yet another way that a PV customer could have a cost effective system for their needs and never need to sell anything back to the utility or need any sort of special agreement to go solar.

---

Thomas Friedman called it the democratization of energy and this is exactly what solar offers.  Individuals now have the option for the energy source of their own choosing.  Utilities have a stranglehold on options just as telephone companies did before the advent of cell phones.  How many of you even have a landline at your house anymore?  How many of you will be at the mercy of electric utilities for service in 10 years?  I think the numbers will be very similar.

---

We are like tenant farmers chopping down the fence around our house for fuel when we should be using Nature's inexhaustible sources of energy — sun, wind and tide. ... I'd put my money on the sun and solar energy. What a source of power! I hope we don't have to wait until oil and coal run out before we tackle that.
         --Thomas Edison